I took over a PI case, settled it, and the client says don't pay the doctor, but the doctor produces a medical lien the prior lawyer signed that wasn't in my file. What do I do with the money?

Plain-English summary

Attorney #1 had represented a client in a personal injury matter, and during the client's treatment the client and Attorney #1 signed a medical lien authorizing payment to the treating physician directly from the settlement. The client became dissatisfied and transferred the file to Attorney #2, the inquiring attorney; the file did not contain a copy of the medical lien, so Attorney #2 was unaware of it. After Attorney #2 settled the case, the client directed the attorney not to pay the doctor. The doctor then contacted Attorney #2, advised the attorney of the lien, and demanded payment. Attorney #2 placed the disputed funds in escrow pending the panel's opinion and sought advice on disbursement.

The panel applied Rule 1.15 ("Safekeeping of Property"). Rule 1.15(b) requires a lawyer holding funds in which a client or third person has an interest to promptly notify that person and to deliver funds they are entitled to receive; Rule 1.15(c) requires the disputed portion of property to be kept separate until a dispute over competing interests is resolved. The panel quoted the comment recognizing that third parties, such as a client's creditors, may have just claims against funds in a lawyer's custody, that the lawyer may have a duty to protect such claims and accordingly refuse to surrender the property to the client, and that the lawyer should not unilaterally arbitrate the dispute.

The panel found that by placing the disputed fee in escrow, the attorney had made an effort to comply with Rule 1.15. It reasoned that Attorney #1 and the client undertook a duty to the physician when they signed the lien, creating reliance on the physician's part. It concluded that if the client continues to dispute the amount owed to the physician, the disputed portion should be held in escrow pending a resolution, arbitration, or interpleader action.

Currency note

This opinion was issued in 1995, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rule 1.15 as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

Common questions

Q: Could the attorney follow the client's instruction not to pay the doctor?

A: Not by simply disbursing the funds. The opinion required the disputed portion to be held in escrow because the physician had a lien-based claim; the attorney could not surrender the disputed funds to the client while the dispute was unresolved.

Q: Did a lien signed by the prior lawyer bind the new attorney's handling of funds?

A: The opinion reasoned that Attorney #1 and the client created the physician's reliance by signing the lien, and it treated the funds as subject to a competing claim under Rule 1.15 that the successor attorney had to respect.

Q: Was placing the money in escrow the right move?

A: Yes. The opinion found that placing the disputed fee in escrow was an effort to comply with Rule 1.15, and that the disputed portion should stay in escrow pending resolution, arbitration, or interpleader.

Background and rules framework

The opinion applied Rhode Island Rule of Professional Conduct 1.15 (Model Rule 1.15), the safekeeping-of-property rule. Rule 1.15(b) governs prompt notice and delivery of funds in which a client or third person has an interest, and Rule 1.15(c) requires segregation of the disputed portion until a dispute over competing interests is resolved. The panel applied the comment's recognition of third-party creditor claims and its caution against a lawyer arbitrating the dispute.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 / RI RPC 1.15(b) (prompt notice and delivery of funds in which a third person has an interest)
• RI RPC 1.15(c) (segregating disputed property until the dispute is resolved)

See also

• RI EAP Op. 95-12: A disputed medical lien on settlement funds
• RI EAP Op. 2004-07: When a former client refuses funds, Rule 1.15 requires maintaining the trust account

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2095-27.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

FINAL

ETHICS ADVISORY PANEL
OPINION # 95-27, Request # 589
Issued May 4, 1995

Attorney # 1 represented a client in a personal injury matter. During the course of the client's treatment, the client and Attorney # 1 signed a medical lien authorizing payment to the treating physician directly from the settlement. The client became dissatisfied with Attorney # 1 and transferred the file to Attorney # 2 (inquiring attorney). The file did not contain a copy of the medical lien therefore Attorney # 2 was not aware of the lien. Attorney # 2 settled the client's case and the client directed Attorney # 2 to not pay the doctor. Attorney # 2 is contacted by the doctor, who advises the attorney about the lien and demands payment. Attorney # 2 placed the disputed funds in escrow pending this Panel's opinion. Attorney # 2 seeks advice regarding the disbursement of escrow funds.

When a lawyer is in possession of funds or property of others, Rule 1.15 entitled "Safekeeping of Property" applies. The Rule states in pertinent part as follows:

(b) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third persons, shall promptly render a full accounting regarding such property.

(c) When in the course of representation a lawyer is in possession of property in which both the lawyer and another person claim interests, the property shall be kept separate by the lawyer until there is an accounting and severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved.

Subsection (b) imposes a duty on a lawyer who is in possession of funds in which a client or third person has an interest to promptly notify the client or third person. The Rule also requires a lawyer to forward to the client or third person any funds that the client or third person is entitled to receive.

In addition, the Comments to Rule 1.15 states that:

Third parties, such as a client's creditors, may have just claims against funds or other property in a lawyer's custody. A lawyer may have a duty under applicable law to protect such third party claims against wrongful interference by the client, and accordingly may refuse to surrender the property to the client. However, a lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party.

By placing the disputed fee in escrow, the inquiring attorney has made an effort to comply with Rule 1.15. According to the facts provided, Attorney # 1 and the client undertook a duty to the physician when they signed a lien creating a reliance on behalf of the physician. If the client continues to dispute the amount owed to the physician, then the disputed portion should be held in escrow pending a resolution, arbitration or interpleader action.